Sonora Lithium

With an Measured plus Indicated Mineral Resource estimate of over 5 million tonnes (‘Mt’) (comprising 1.9 Mt of Measured Resources and 3.1Mt of Indicated Resources) of lithium carbonate equivalent (‘LCE’)[i] and an additional Inferred Mineral Resource of 3.7 Mt of LCE, Sonora is regarded as one of the world’s larger known clay lithium deposits.

Following the results of the FS, management is focused on advancing Sonora towards production to satisfy expected continuing growth in demand for lithium driven by growing sectors such as electric vehicles and energy storage.

Sonora holds one of the world’s larger lithium resources and benefits from being both high grade and scalable. The project, which is located in an existing mining district and has excellent access to infrastructure, consists of 10 contiguous concessions covering 97,389 Ha and is located 190km NE of Hermosillo in northern Mexico. The Company has a 100% interest in the La Ventana concession and a 70% interest in Mexilit and Megalit.

The Sonora lithium property hosts a large lithium deposit. The polylithionite mineralisation is hosted within shallow dipping sequences, outcropping on surface. As part of the FS, a Mineral Resource estimate was prepared by SRK Consulting (UK) Limited (‘SRK’) in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects ('NI 43-101'). The following tables present the summary of current lithium resources for the Project, these Mineral Resources are inclusive of Mineral Reserves:

Table 2: Measured and Indicated Mineral Resources

Category

Cut–off
(Li ppm)

Tonnes (000t)

Li (ppm)

K (%)

LCE (000t)

LCE attributable to Bacanora (000t)

Measured

1,000

103,000

3,480

1.5

1,910

1,776

Indicated

1,000

188,000

3,120

1.3

3,130

2,345

Total

1,000

291,000

3,250

1.4

5,038

4,119

Table 3: Inferred Mineral Resources

Category

Cut–off
(Li ppm)

Tonnes (000t)

Li (ppm)

K (%)

LCE (000t)

LCE attributable to Bacanora (000t)

Inferred

1,000

268,000

2,650

1.2

3,779

3,220

Table 4: Mineral Reserves: (Cut-off grade of 1,500 ppm Li)

Category

Tonnes Ore (000t)

Li (ppm)

K (%)

LCE (000t)

LCE attributable to Bacanora (000t)

Proven

80,146

3,905

1.64

1,666

1,550

Probable

163,662

3,271

1.36

2,849

2,126

Total

243,808

3,480

1.45

4,515

3,676

Feasibility Study Key Indicators

Value

Pre-tax Net Present Value ($ 000)

1,253,027

Pre-tax IRR (%)

26.1%

Simple Payback Stage 1 (years)

4

Initial Construction Capital Cost Stage 1 ($ 000)

419,616

Construction Capital Cost Stage 2 ($ 000)

380,262

Av. LOM operating costs ($/t Li2CO3)

3,910

Av. operating costs ($/t Li2CO3 net of K2SO4 credits)

3,418

Post-tax NPV (at 8% discount) ($ 000)

802,464

Post-tax IRR (%)

21.2%

Av. annual EBITDA with co-products ($ 000)

229,362

Annual Li2CO3 production capacity Stage 1

17,500 t

Annual Li2CO3 production capacity Stage 2

35,000 t

Annual K2SO4 production capacity Stage 2

30,000 t

Mining Operations

The mining operation for the Project is planned as an open-pit development using a combination of continuous miners to mine the ore zones and a truck/shovel fleet to remove the waste material. Mining operations will be augmented with an ancillary fleet of dozers, graders and water trucks. The Mineral Reserve estimate was prepared by Independent Mining Consultants Inc. (‘IMC’) in Tucson, Arizona. The Mineral Reserve estimate includes an ore recovery factor of 100% and mining dilution of 100 mm at the top and bottom of the mineralized beds, with the grades of the elements in the adjacent lithologies.

Processing

The process plant design comprises a pre-concentration stage to produce an initial concentrate prior to roasting. The concentrate is subsequently heated in a kiln, at approximately 950 degrees Celsius, in combination with re-cycled sodium sulphate (‘Na2SO4’), which is a by-product produced from the Sonora lithium plant, to produce an intermediate lithium sulphate (‘Li2SO4’) product. This sulphate material then undergoes hydrometallurgical treatment, filtration, cleaning, precipitation and packaging, to produce a >99.5% Li2CO3 final battery grade product. The integrated plant has been designed to initially process 1.1 Mt of ore per year, during Stage 1 of the Project, subsequently increasing to some 2.2 Mt per year at Stage 2, producing 17,500 tpa and 35,000 tpa of lithium carbonate, respectively.

The plant design also includes a circuit to produce up to 30,000 tpa of K2SO4/SOP product through a series of evaporation and precipitation stages.

Metallurgical testwork for the FS was carried out at SGS Laboratories (‘SGS’) in Perth, WA, and ANSTO Laboratories (‘ANSTO’) in Sydney, NSW, Australia. The process engineering and design for the process plants and infrastructure was completed by Ausenco Pty Ltd (‘Ausenco’).

Pilot Plant

Over CAD$20 million has been invested to date both on exploration and on the development of a pilot plant in nearby Hermosillo which has produced high quality lithium carbonate during ongoing testwork conducted over 24 months. This is a key differentiator and played key role in the Company signing a long term lithium off-take with the Hanwa Co., Ltd. of Japan for up to 100% of the Stage 1 lithium carbonate production from Sonora. In addition, Hanwa became a cornerstone 10% shareholder in Bacanora via a private placement at the then current share price of 82.5 pence per share on 2 May 2017.